Regulatory Profiles

In October, the Centers for Medicare and Medicaid Services (CMS) launched two initiatives that aim to reward hospitals for outcomes and quality: the Hospital Value-Based Purchasing Program and the Hospitals Readmissions Reductions Program. Created under the Affordable Care Act, both programs aim to save Medicare money and boost quality.

Under the value-based purchasing program, Medicare will withhold 1% of regular reimbursements to acute care hospitals and redistribute the resulting approximately $850 million based on certain performance criteria. Taken from money that Medicare otherwise would have spent, the size of the fund will gradually increase over time, resulting in a shift from payments based on volume to payments based on performance, according to CMS.

The quality metrics include: ensuring that patients who may have had a heart attack receive care within 90 minutes; providing care within a 24-hour window to surgery patients to prevent blood clots; communicating discharge instructions to heart failure patients; and the results of patient satisfaction surveys. The better a hospital does on its quality measures, the greater its reward.

The second pay-for-performance program focuses on hospital readmissions. Similar to the value-based purchasing program, the Hospitals Readmissions Reductions Program withholds up to 1% of reimbursements, but only for hospitals that show too many readmissions within 30 days of discharge for heart attack, heart failure, and pneumonia. CMS plans to add other conditions to the list in the future. Some experts have estimated that nearly two-thirds of hospitals could face penalties of more than $100,000, with hospitals overall losing about $280 million in reimbursement this year.

Penalties for readmissions will increase over time, from 1% this year, to 2% next year, and 3% in 2015. According to CMS, about 2 million Medicare beneficiaries treated in hospitals return within 30 days annually, costing more than $17 billion.

The American Civil Liberties Union (ACLU) and the Public Patent Foundation are asking the U.S. Supreme Court to again review and invalidate BRCA1 and BRCA2 patents held by Myriad Genetics and the University of Utah Research Foundation.

In May 2009, The College of American Pathologists and the Association for Molecular Pathology, among others, joined an ACLU lawsuit challenging the patents used for breast cancer risk testing.

On March 29, 2010 a New York federal court ruled that the patents on the BRCA1 and BRCA2 genes were invalid. The U.S. Court of Appeals for the Federal Circuit heard Myriad's appeal of that ruling in April 2011. In July 2011, the appeals court ruled that companies can obtain patents on the genes but cannot patent methods to compare those gene sequences.

Finally, in March 2012, the U.S. Supreme Court vacated the decision of the appeals court and instructed the court to reconsider the case in light of Mayo v. Prometheus, a Supreme Court decision unanimously invalidating patents on methods for evaluating a patient's response to a drug.

When ACLU lawyers argued before the U.S. District Court judge in New York, they said that medical research was being held back by the BRCA1 and BRCA2 patents and that these genes were "an ancient secret of nature." Attorneys representing Myriad Genetics and the University of Utah Research Foundation countered that a ruling making these patents invalid would "wreck the foundation of the entire biotechnology industry."

The House of Representatives has passed an AACC-endorsed bill that could ease one of labs' biggest problems with proficiency testing (PT) programs. The bill, H.R.6118, "Taking Essential Steps for Testing Act," gives the Centers for Medicare and Medicaid Services (CMS) greater flexibility on what penalties to impose on a laboratory that sends a PT specimen to an outside laboratory.

Under current law, laboratories that refer PT specimens to an outside laboratory lose their CLIA certificate for at least 1 year, even if the specimen was not referred to intentionally cheat. Since many labs have policies that automatically refer certain specimens to another lab, the statute has been a cause for concern for many years.

The House passed the bill just before both houses of Congress recessed, but after the elections, the Senate could vote on companion legislation during the lame duck session that begins November 13.